DOCSLIB.ORG

A Note on Free Trade Agreements and Their Costs*

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
A Note on Free Trade Agreements and Their Costs* A NOTE ON FREE TRADE AGREEMENTS AND THEIR COSTS* Dr. V.K. Saraswat1, Prachi Priya2 and Aniruddha Ghosh3 * Disclaimer: Opinions and recommendations in this article are exclusively of the authors and not of any other individual or institution. 1 Dr. V.K. Saraswat is the former DRDO Chief & Secretary Defence R&D, recipient of Padma Shri & Padma Bhushan and is currently Member, NITI Aayog 2 Ms. Prachi Priya is a Mumbai based economist 3 Mr. Aniruddha Ghosh works in the Office of Dr. VK. Saraswat Introduction Trade theory has consistently been a strong proponent of free trade of goods, services, capital and labour. However, a growing wave of protectionism and trade wars have dominated global trade recently. To underscore the prevailing sentiments regarding protectionism, it is instructive to look at what a free-trade champion and Nobel Laureate Paul Krugman had to say on the issue of seamless trade: “It’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict.” New York Times, 9th March, 2016 While it is difficult to assess whether the trade war will lead to a significant shift in the global trade paradigm, in the current scenario India should carefully review existing Free Trade Agreements (FTAs) before negotiating new ones. Evidences from recent FTAs suggest unfavorable gains to our trade partners. Worsening of our trade balances with our FTA partner countries merits attention. This note identifies India’s trade patterns, its export potential, competitiveness vis-à-vis trade partners, India’s FTA gains and losses and some policy recommendations. India’s Trade Patterns, Value Added and Export Potential India is a fairly open economy with overall trade (exports plus imports) as a percentage of GDP around 40%. Its trade deficit has grown from USD 6bn in FY01 to USD 109bn in FY17 (Table 1). However, India has diversified its exports since the 1990s both geographically and product- wise. In a working paper for the International Monetary Fund (IMF), Anand et.al state “structural transformation, future growth and export performance depend on: (i) diversification across destinations, products, and services (ii) composition of the export basket measured by technological content, quality, sophistication, and complexity of exports and (iii) how closely related a country’s goods and services exports are to globally-traded products and services.” India’s exports have diversified both in terms of markets and products and services in the past two decades. Indian exports have gradually found their way into new markets. The size of developed countries in India’s exports has declined and that of emerging economies has increased. India now exports over 50% of its exports to emerging and developing economies surpassing the share of advanced economies. In fact, European Union (EU) and United States of America (USA) now account for only 30% of India’s total exports compared to 45% in 2000. In terms of the product mix, there has been a gradual shift as the export sector has moved up the value chain, leading the way with high-value products like industrial machinery, automobiles and car parts, and refined petroleum products. Manufactured goods along with petroleum products accounted for nearly 85% of India’s export basket in FY17. A breakdown is available in Table 2. In terms of outward reliance, the foreign content of India’s exports (value of imported intermediate goods and services that are embodied in India’s exports) has increased significantly and across all industries in the last two decades, more than doubling from under 10 percent in 1995 to 24.0 percent in 2011.The share of foreign value addition in the exports of the manufacturing sector is the highest and clocks nearly 50 percent. (OECD Trade-in-value added Database). Figure 1: India’s Trade Balance (USD) over the years (FY’00 – FY’17) India's trade balance (USDbn) 600.000 500.000 400.000 300.000 200.000 100.000 0.000 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Exports Imports Figure 2: India's exports by category (% share of total exports) FY92 FY02 FY17 Petroleum & crude products 1.8 4.8 11.4 Agricultural & allied products 17.9 13.5 12.1 Ores & minerals 4.0 2.9 1.2 Manufactured goods 74.9 76.1 74.3 Leather & leather manufactures 5.8 4.4 1.9 Chemicals & related products 7.1 9.8 12.2 Engineering goods 12.2 13.2 23.0 Electronic goods 1.4 2.7 2.5 Textiles (excluding readymade garments) 13.0 11.9 6.0 Readymade garments 11.6 11.4 6.3 Other manufactured goods 23.8 22.8 22.4 Other commodities 1.2 2.7 1.1 In terms of export potential, the International Trade Center (ITC) estimates India’s untapped export potential to around USD 201.4bn with a corresponding import potential pegged at USD 181.8bn. Worked diamonds shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth USD 17.2 bn. Also, the markets with greatest potential for India’s exports are United States of America, China and United Arab Emirates. United States of America shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth USD 18.6 bn. These numbers are significant in the view of rising trade volatility. Figure 3: India’s products with Export Potential (ITC Export Potential Map) This infographic is available here. Drivers of India’s Exports It is also important to understand what drives India’s exports. Indian exports are sensitive to price changes, global demand and supply side bottlenecks. The way our export basket has evolved over the past two decades, it has made them much more responsive to global demand as compared to price changes. This is because India now exports more income sensitive items like engineering goods, petroleum, gems and jewelry and chemical products. As per a 2015 IMF paper, in the long- run, “a 1% increase in India’s international relative export prices could reduce export volume growth by about 0.9% for all industries and by about 1.1% for the manufacturing sector.” The long-run coefficient on global demand is estimated to be slightly above 1.5, which suggests that India’s exports are more sensitive to changes in external demand than price changes. Thus, given the export basket composition first, increase in global demand drives India’s exports much more than price cuts. Further, the IMF research suggests that binding supply-side constraints like energy shortages dampen price responsiveness of exports. In case of industry with an energy share of about 4% in the gross value of its output (which is about the average share in manufacturing), a 1% relative price depreciation will result in export growth of 0.6%. However, in the same industry in case of energy deficit of about 10%, the export growth will decline to 0.4%. Second, shows that tackling the issue of energy deficit can boost export performance considerably. Similarly, higher logistics costs have been a major impediment to export growth. Various studies peg logistics cost in India to be around twice of that in developed countries. Average logistics costs in India are about 15% of GDP while such costs in developed countries are about 8%. Improving Ease of trading is a high priority area for the government as Indian exporters face high transaction costs making them less competitive in the global market. The Economic Survey 2017-18 also points out that, “Improved logistics have huge implications on increasing exports, as a 10% decrease in indirect logistics cost can contribute to around 5-8% of extra exports.” In the Global Competitiveness Index 2017-18 compiled by the World Economic Forum, while China ranks 27th, India is placed 13 points below at the 40th place. Competitiveness as a factor plays out crucially in determining export advantage nations have. Table 3 compares India and China on few key competitiveness metrics. Table 1: Global Competitiveness Indicators 2017, compiled by World Economic Forum (WEF) There is no doubt that China is way ahead of India in terms of its manufacturing capability and export performance. United Nations Industrial Development Organization’s (UNIDO) CIP (Competitiveness of Industrial Production) is a composite index that measures “the ability of countries to produce and export manufactured goods competitively”, with 1.0 being the best score. The CIP consists of eight sub-indicators grouped along three dimensions of industrial competitiveness—capacity to produce and export manufactures, technology deepening and upgrading, and world impact. India’s CIP score improved from 0.04 in 2000 to 0.07 in 2010. In comparison, China’s CIP score improved from 0.16 in 2000 to 0.33 in 2010. While India managed to increase its share in world manufacturing value added from 1.1% in 2000 to 2.0% in 2010, China more than doubled its share from 6.7% to 15.0% over the same period. The technological backwardness of Indian manufacturing exports can be gauged by the share of medium and hi-tech activities. India’s share in manufacturing exports improved from 18.7% in 2000 to 28.2% in 2010, but is still far behind that of China’s, 60.2% in 2010. India’s experience with Free Trade Agreements (FTAs) Regional trade agreements (RTAs) have become increasingly prevalent since the early 1990s.
Load more

Recommended publications
  • Chapter 2 New Challenges to the Export Oriented Growth Model
    Chapter 2 New Challenges to the Export Oriented Growth Model Song Hong Institute of World Economics and Politics (IWEP), Chinese Academy of Social Sciences (CASS) December 2012 This chapter should be cited as Song, H. (2012), ‘New Challenges to the Export Oriented Growth Model’, in Zhang, Y., F. Kimura and S. Oum (eds.), Moving Toward a New Development Model for East Asia- The Role of Domestic Policy and Regional Cooperation . ERIA Research Project Report 2011-10, Jakarta: ERIA. pp.27-54. CHAPTER 2 New Challenges to the Export Oriented Growth Model SONG HONG Institute of World Economics and Politics (IWEP), Chinese Academy of Social Sciences (CASS) The export-oriented strategy played a crucial role for the successful development of East Asian economies after the World War II. They first exported low-technology manufactured goods, then gradually upgraded and transformed their export goods packages and finally caught up with the developed countries. Export oriented strategy in East Asia has been based on a series of internal and external conditions. Those conditions includes an open international environment, the existence of a certain size of external market, a stable supply of raw materials, as well as good and convenient navigation, and some internal conditions. Global financial crisis badly changed some of these conditions. For example, the external market was very unstable and was growing very slow; after the financial crisis, international raw material and energy prices experienced sharp volatility, which caused great challenges to the countries and enterprises seeking to implement an export oriented strategy. However, after the financial crisis the changes in international and domestic environments did not change the nature and trends of globalization, only temporarily slowed the pace of this process.
    [Show full text]
  • Do Hub-And-Spoke Free Trade Agreements Increase Trade? a Panel Data Analysis
    ADB Working Paper Series on Regional Economic Integration Do Hub-and-Spoke Free Trade Agreements Increase Trade? A Panel Data Analysis Joseph Alba, Jung Hur, and Donghyun Park No. 46 | April 2010 ADB Working Paper Series on Regional Economic Integration Do Hub-and-Spoke Free Trade Agreements Increase Trade? A Panel Data Analysis Joseph Alba,+ Jung Hur,++ The authors are grateful to Andrew Rose, Kamal Saggi, and three anonymous referees for their useful comments. The +++ and Donghyun Park usual disclaimer applies. This research is supported by the Sogang University Research Grant. Joseph Alba is grateful for No. 46 April 2010 research funding from Nanyang Technological University. +Joseph Alba is Associate Professor at the Economics Division, School of Humanities and Social Sciences, Nanyang Technological University, Singapore 639798. Tel +65 6 790 6234, Fax +65 6 792 4217, [email protected] ++Jung Hur is Associate Professor at the Department of Economics, Sogang University 1 Shinsu-Dong, Mapo-Gu, Seoul 121-742, Korea. Tel +82 2 705 8518, Fax +82 2 704 8599, [email protected] +++Donghyun Park is Principal Economist at the Economics and Research Department, Asian Development Bank, Philippines. Tel +63 2 632 5825, Fax +63 2 636 2342, [email protected] The ADB Working Paper Series on Regional Economic Integration focuses on topics relating to regional cooperation and integration in the areas of infrastructure and software, trade and investment, money and finance, and regional public goods. The series is a quick-disseminating, informal publication that seeks to provide information, generate discussion, and elicit comments. Working papers published under this series may subsequently be published elsewhere.
    [Show full text]
  • (Output) Import Tariff Reduction Increase Home Exports? Evidence from Korean Manufacturing Plant–Product Data
    ERIA-DP-2019-29 ERIA Discussion Paper Series No. 315 Does Home (Output) Import Tariff Reduction Increase Home Exports? Evidence from Korean Manufacturing Plant–Product Data Chin Hee HAHN Gachon University, Republic of Korea Ju Hyun PYUN§ Korea University Business School, Republic of Korea February 2020 Abstract: This study examines the effects of domestic output import tariff reduction on domestic plant export dynamics and clarifies the underlying mechanism, using rich plant–product data from the Republic of Korea for 1991–2002. We find that home import liberalisation increases domestic plants’ export market participation (extensive margins), particularly for industry where markup growth is more negative during tariff reductions. However, we do not find evidence that cutting import tariffs significantly affects incumbent home exporters’ export volume (intensive margins). This study unveils a new mechanism – ‘escape competition’ to foreign markets – by showing that reducing import tariffs leads domestic firms under heightened industry competition to look for an opportunity in foreign markets via export inauguration. Keywords: Plant-product level data; output tariff; Lerner symmetry; extensive margin; intensive margin; product scope JEL Classification: F15; F23 Corresponding author: Ju Hyun Pyun, Business School, Korea University, 145 Anam-Ro, Seongbuk- Gu, Seoul 02841, Republic of Korea, Tel: 82-2-3290-2610, E-mail: [email protected] § This research was conducted as part of the 2018 Microdata project of the Economic Research Institute for ASEAN and East Asia (ERIA). The authors are deeply indebted to the members of this project for their invaluable suggestions. The opinions expressed in this paper are the sole responsibility of the authors and do not reflect the views of ERIA.
    [Show full text]
  • What Is Really in the Economic Partnership Agreements for the Southern African Region? a Perspective from Botswana's Beef Expo
    Agrekon, Vol 47, No 4 (December 2008) Mbatha & Charalambides What is really in the economic partnership agreements for the Southern African region? A perspective from Botswana’s beef export markets CN Mbatha1 & N Charalambides2 Abstract The signing of the Economic Partnership Agreements (EPAs) between the European Union (EU) and the African Caribbean Pacific (ACP) nations dominated the multilateral trade agenda in late 2007 and early 2008. While the Caribbean nations signed the full EPAs, some of the African countries only singed interim agreements with the EU and a number of West African countries chose not to sign any EPA. Using the case of Botswana’s export markets, especially in agriculture, it is argued that the interim Southern African Development Community (SADC) EPA, which was signed by Botswana and her neighbours, with the exception of South Africa, may have been economically sensible in protecting Botswana’s rural poor, at least in the short run. By tracing trade flows from the border to specifically poor sectors of the country, the importance of the beef exports sector to the poor and rural communities was found. The potential effects on the most significant exports of tariff bands associated with preferential agreements with the EU were found to be most beneficial in comparison to the Most Favoured Nation (MFN) and the South Africa-EU Trade Development and Cooperation Agreement (TDCA) tariff bands. But it is also argued that the EPA will most likely have far reaching long run costs on regional economic development and institutional integration, within the SADC and Southern African Customs Union (SACU).
    [Show full text]
  • How Do Exports and Imports Affect the Use of Free Trade Agreements? Firm-Level Survey Evidence from Southeast Asia
    ERIA-DP-2016-01 ERIA Discussion Paper Series How Do Exports and Imports Affect the Use of Free Trade Agreements? Firm-level Survey Evidence from Southeast Asia Lili Yan ING* Economic Research Institute for ASEAN and East Asia (ERIA) and University of Indonesia Shujiro URATA ERIA and Waseda University Yoshifumi FUKUNAGA Economic Research Institute for ASEAN and East Asia (ERIA) January 2016 Abstract: Based on profit estimations, findings from a firm-level survey of 630 manufacturing firms across Association of Southeast Asian Nations (ASEAN) countries conducted in 2013 showed that a 1 percent increase in the share of exports in total sales will increase the probability of use of free trade agreements (FTAs) by 0.2 percent, whereas a 1 percent increase in the share of imports in total inputs will reduce the probability of use of FTAs by 0.4 percent. Results from locally weighted scatterplot smoothing (LOESS) show that the use of FTAs is tilde-shaped and negative-shaped as a function of exports and imports, respectively. Keywords: Free Trade Agreement, ASEAN, Regional integration, FTA Utilisation JEL: F14, F15, F16, F23, F6 * The authors thank national teams for their work on leading surveys in Southeast Asia – MOFAT for Brunei Darussalam, CICP for Cambodia, LPEM–FEUI for Indonesia, NERI for Lao PDR, MIER Malaysia, YIE for Myanmar, PIDS for the Philippines, SIIA for Singapore, University of Chulalongkorn for Thailand, and CIEM for Viet Nam. The authors thank Ikumo Isono and Archanun Koophaiboon, and participants at the 14th East Asian Economic Association Conference for their comments on an earlier draft, and Robert Herdiyanto for his assistance in data cleaning at an early stage of the survey, and Rully Prassetya and Muhammad Rizqy for checking the use of GSP.
    [Show full text]
  • FTA Tariff Tool New Online Tool Highlights Tariff Benefits of Free Trade Agreements for American Businesses
    U.S. Department of Commerce International Trade Administration FTA Tariff Tool New Online Tool Highlights Tariff Benefits of Free Trade Agreements for American Businesses http://www.export.gov/FTA/FTATariffTool/ • Are you an exporter seeking a market where the United States The FTA Tariff Tool: has an existing competitive advantage? • Are you spending time looking through pages of legal texts • consolidates and distills tariff to figure out the tariff under a trade agreement for your schedules down to a simple products? search function • Would you like to perform instant and at-a-glance searches • allows users to see how for trade and tariff trends in one easily accessed location particular sectors are treated online? under the agreements or recent trends in exports to the trade The Free Trade Agreement (FTA) Tariff Tool will ease your exporting agreement partner markets process and could help you increase your exports to U.S. trade agreement partner markets. It will streamline your industrial and • helps reduce costs and consumer product tariff searches by making information on tariff uncertainty for U.S. businesses benefits companies receive under U.S. trade agreements more accessible. The FTA Tariff Tool consolidates and condenses trade, tariff and sectoral information into a user-friendly public interface. The tool is provided free of charge by the U.S. Department of Commerce. Businesses are able to see the current and future tariffs applied to their products, as well as the date on which those products become duty free. By combining sector and product groups, trade data, and the tariff elimination schedules, users can also analyze how various sectors are treated across multiple trade agreements.
    [Show full text]
  • ASSESSING the IMPACT of TRADE AGREEMENTS on GENDER EQUALITY: Canada-EU Comprehensive Economic and Trade Agreement
    GENDER AND TRADE ASSESSING THE IMPACT OF TRADE AGREEMENTS ON GENDER EQUALITY: Canada-EU Comprehensive Economic and Trade Agreement GENDER AND TRADE ASSESSING THE IMPACT OF TRADE AGREEMENTS ON GENDER EQUALITY: Canada-EU Comprehensive Economic and Trade Agreement WE EMPOWER, EUROPEAN UNION, UN Women and ILO WE EMPOWER – G7: The Promoting the Economic Empowerment of Women at Work through Responsible Business Conduct in G7 Countries (WE EMPOWER – G7) programme is funded by the European Union (EU) and implemented by UN Women and the International Labour Organization. WE EMPOWER – G7 convenes multistakeholder dialogues in G7 countries and the EU to exchange knowledge, experiences, good practices and lessons learned. WE EMPOWER – G7 also encourages firms of all sizes and in all industries to sign the Women’s Empowerment Principles and to galvanize their shareholders and stakeholders throughout their supply chains to drive change for gender equality. Signatories are role models for attracting talent role models for attracting talent, entering new markets and serving their communities, while measurably improving the bottom line. See more at: www.empowerwomen.org/projects. The European Union is the largest trading block in the world. The EU is committed to sustainable development and gender equality. It is working to integrate gender perspective in its trade policy, including through trade agreements such as the CETA with Canada. Work on trade and gender is advancing through a wide range of actions in the following areas: (1) data and analysis, (2) gender provisions in trade agreements, and (3) trade and gender in the WTO. UN Women is the UN organization dedicated to gender equality and women’s empowerment.
    [Show full text]
  • Trade Facilitation and the EU-ACP Economic Partnership Agreements
    Journal of Economic Integration 23(3), September 2008; 518-546 Trade Facilitation and the EU-ACP Economic Partnership Agreements Maria Persson Lund University Abstract This paper assesses the potential effects from trade facilitation in terms of increased trade flows both on average and specifically for the six regional groups of ACP countries negotiating Economic Partnership Agreements (EPAs) with the EU. Data from the World Bank’s Doing Business Database on the time required to export or import are used as indicators of cross-border transaction costs, and a gravity model on two-way bilateral trade between 22 EU countries and 100 developing countries is estimated using a sample selection approach. The results suggest that time delays on the part of the exporter and the importer generally significantly decrease trade flows, but also that this effect is not constant, in the sense that the elasticity of trade with respect to border delays declines at higher levels of time requirements. On average, lowering border delays in the exporting country by one day from the sample mean would yield an export-increasing effect of about 1 percent, while the same reduction in the importing country would increase imports by about 0.5 percent. Significant negative effects are also found of both export and import transaction costs for most EPA groups, and the effects tend to be at least as large as the average or larger. The results are generally robust for a number of alternative estimation methods such as Poisson estimation, IV estimation taking sample selection into account and the sample selection approach suggested by Helpman et al.
    [Show full text]
  • Research Paper 57 GLOBALIZATION, EXPORT-LED GROWTH and INEQUALITY: the EAST ASIAN STORY
    Research Paper 57 November 2014 GLOBALIZATION, EXPORT-LED GROWTH AND INEQUALITY: THE EAST ASIAN STORY Mah-Hui Lim RESEARCH PAPERS 57 GLOBALIZATION, EXPORT-LED GROWTH AND INEQUALITY: THE EAST ASIAN STORY Mah-Hui Lim* SOUTH CENTRE NOVEMBER 2014 * The author gratefully acknowledges valuable inputs and comments from the following persons: Yılmaz Akyüz, Jayati Ghosh, Michael Heng, Hoe-Ee Khor, Kang-Kook Lee, Soo-Aun Lee, Manuel Montes, Pasuk Phongpaichit, Raj Kumar, Rajamoorthy, Ikmal Said and most of all the able research assistance of Xuan Zhang. The usual disclaimer prevails. THE SOUTH CENTRE In August 1995 the South Centre was established as a permanent inter- governmental organization of developing countries. In pursuing its objectives of promoting South solidarity, South-South cooperation, and coordinated participation by developing countries in international forums, the South Centre has full intellectual independence. It prepares, publishes and distributes information, strategic analyses and recommendations on international economic, social and political matters of concern to the South. The South Centre enjoys support and cooperation from the governments of the countries of the South and is in regular working contact with the Non-Aligned Movement and the Group of 77 and China. The Centre’s studies and position papers are prepared by drawing on the technical and intellectual capacities existing within South governments and institutions and among individuals of the South. Through working group sessions and wide consultations, which involve experts from different parts of the South, and sometimes from the North, common problems of the South are studied and experience and knowledge are shared. NOTE Readers are encouraged to quote or reproduce the contents of this Research Paper for their own use, but are requested to grant due acknowledgement to the South Centre and to send a copy of the publication in which such quote or reproduction appears to the South Centre.
    [Show full text]
  • Itc) for the Meeting of the Ministers of Foreign Affairs of Lldcs
    STATEMENT OF THE INTERNATIONAL TRADE CENTRE (ITC) FOR THE MEETING OF THE MINISTERS OF FOREIGN AFFAIRS OF LLDCS PARTNERING FOR ACCELERATED IMPLEMENTATION OF THE VIENNA PROGRAMME OF ACTION FOR LLDCS AND ACHIEVING SUSTAINABLE DEVELOPMENT IN LLDCS IN THE ERA OF COVID-19 TUESDAY, 23 SEPT 2020 DOROTHY TEMBO ACTING EXECUTIVE DORECTOR Your Excellency Minister Tileuberdi, Chair of the Group of LLDCs, Ministers of Foreign Affairs, Excellencies, During this period of continued uncertainty, it is important to recall the most essential ingredients of resilience: partnership, technical collaboration, and the stability of the multilateral system. The Vienna Programme of Action for LLDCs (VPoA) remains a central actionable component of helping LLDCs to meet the SDGs and building back better for the ‘new normal’. As the joint agency of the United Nations and the World Trade Organization, the International Trade Centre is fully committed to supporting the implementation of the VPoA through enhancing trade in LLDCs and their transit countries. Our approach is focused on assisting micro, small and medium-sized enterprises (MSMEs) to connect to global markets, and for that we work closely with private sector institutions. ITC contributes to two of the six priority areas of the VPoA: 1) International trade and trade facilitation, and 2) Regional integration and cooperation. Since 2014, ITC has implemented more than 40 projects for almost all LLDCs including our global projects such as of public goods on data and intelligence. Still, in this period of COVID-19, we have seen demand for trade related assistance increasing as LLDCs and their MSMEs seek help in coping with the pandemic.
    [Show full text]
  • The Australia-US Free Trade Agreement (AUSFTA)
    The Australia-US Free Trade Agreement (AUSFTA) On January 1, 2005, Australia entered into the Free Trade Agreement with the United States (AUSFTA), which will provide major benefits for both countries immediately, through the removal of tariffs, and longer term, through the phased opening of markets. It is Australia’s first trade agreement with a major economy, and the first agreement that the U.S. has entered with a major economy since 1988. For more information visit: http://www.ustr.gov/trade-agreements/free- trade-agreements/australian-fta In addition to the elimination of tariffs, AUSFTA provides benefits in a range of other sectors. Certain services markets will be opened; intellectual property will be better protected; investments will be facilitated through predictable access, and U.S. firms will be allowed to compete for Australia's government purchases on a nondiscriminatory basis. Non-compliant state government procurement preferences, for example, will be phased out after three years of the agreement. Some aspects, including provisions for local broadcasting content and local industry involvement expectations in major defense contracts, have been excluded from the agreement. Further information on How U.S. companies can benefit from the AUSFTA, Tariff Elimination Schedule, Declaring origin, Rules of origin and frequently asked questions, can be found here: http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002771.asp Q and A on the AUSFTA What is the U.S.-Australia Free Trade Agreement? How does the agreement
    [Show full text]
  • Industrialisation: Import Substitution to Export Promotion
    University of Wollongong Research Online Faculty of Business - Economics Working Papers Faculty of Business and Law January 2000 Industrialisation: Import Substitution to Export Promotion Kankesu Jayanthakumaran University of Wollongong, [email protected] Follow this and additional works at: https://ro.uow.edu.au/commwkpapers Recommended Citation Jayanthakumaran, Kankesu, Industrialisation: Import Substitution to Export Promotion, Department of Economics, University of Wollongong, 2000. https://ro.uow.edu.au/commwkpapers/30 Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library: [email protected] University of Wollongong Department of Economics Working Paper Series 2000 Industrialisation: Import Substitution to Export Promotion Kankesu Jayanthakumaran WP 00-09 INDUSTRIALISATION: IMPORT SUBSTITUTION TO EXPORT PROMOTION Kankesu Jayanthakumaran* ABSTRACT Import-substitution policy creates biases in the incentive structure and lowers the growth of potential exports in the long run. Trade reforms in this respect are likely to reduce the gap between domestic and border prices. The expectation is to bring better industrial performance on the lines of comparative advantages. This paper examines the import-substitution policy and the effect and impact of trade liberalisation. INTRODUCTION Neoclassical economic theory focuses on the market or exchange with the assumption that the price mechanism works well and allocates resources efficiently. A focus on the effectiveness of the market mechanism in allocating resources is a core theme of this approach. Promoting foreign trade to access the potential static and dynamic gains and removing the widespread inefficiencies in developing countries due to higher level of protection are some of the issues that the supporters of the market mechanism focus on.
    [Show full text]